Ask Eli: Interest Rate Predictions & New Loan Limits

This regularly sponsored question and answer column is written by Eli Tucker, Arlington-based real estate agent and Arlington resident. Please email your questions to him for a response in the next few columns. Video summaries of some articles are available on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: What do you expect from mortgage interest rates in 2022?

Reply:

Historically low rates

The first thing to understand about mortgage interest rates is that they are market determined and the forecast has the same degree of unpredictability as any other economic / market-based forecast (GDP, unemployment, stocks, etc.). So take predictions / forecasts with a grain of salt.

Higher prices always “manageable”

For perspective, the chart above shows the average 30-year fixed rate mortgages in the United States since 1971. Historically low interest rates have been one of the main drivers of the rapid appreciation in prices. house prices that we have observed over the past 12 to 18 months.

The charts below, courtesy of the National Association of Realtors, show that low interest rates have kept affordability, based on mortgage payments relative to income, below the housing bubble of 2005-2007, despite the soaring house prices relative to income; even higher than the peaks of ’05 -’06.

Forecast of future rates

For years we’ve read / heard experts say it’s hard to imagine mortgage rates going down, often paired with overly-selling real estate messages that you need to buy now because rates have never been so high. low and probably won’t stay that way. this down much longer. The problem with these claims is that mortgage rates have been going down for about 40 years now (with relatively minor fluctuations along the way) …

That said, even small short / medium term rate fluctuations impact affordability and buying decisions, making forecasting for the next 12-24 months relevant to those currently or soon to be. active in the buyers / sellers market. . The graph below shows the latest 30-year fixed mortgage rate forecasts from four major housing research sources:

Everyone expects mortgage rates to rise over the next 12-24. This is mainly based on the expectation that the Fed will begin to ease its economic support and raise interest rates (indirectly influence mortgage rates) to fight inflation, so if this strategy changes, mortgage rate forecasts will change. also.

I think a slow, gradual increase in rates, as predicted by Fannie, Freddie, and NAR, is unlikely to have much of an influence on home values, but any sharp increases, or even the pace that MBA predicts, could cause some downward pressure on prices. Home values ​​are a big part of the US economy, so you can expect the Fed to make some effort to prevent mortgage rate spikes that are shocking the housing market.

High loan limits

The Federal Housing Finance Agency (FHFA) has just released new compliant loan limits for 2022, with significant increases to reflect recent price growth. Jurisdictions in the greater DC metropolitan area have received the maximum loan limit of $ 970,800. Starting in 2022, Fannie / Freddie will insure loans of up to $ 970,800 with as little as 5% down payment, or the equivalent of a purchase price of just under $ 1,022,000 with 5 % deposit. The new compliant limits increase the maximum loan amount by 3% to $ 647,200, or the equivalent of a purchase price of just over $ 667,000 with a decrease of 3%.

For any compliant loan (or any loan for that matter), borrowers must also qualify on several factors, including credit rating, debt-to-income ratio, first-time buyer status, etc. Please feel free to contact me for lender recommendations if you are interested in exploring your mortgage options.

If you would like to discuss buying, selling, investing or leasing, please do not hesitate to contact me at [email protected].

If you would like an answer to a question in my weekly column or to discuss buying, selling, renting or investing, please send an email to [email protected]. To read one of my old articles, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles are available on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a Licensed Real Estate Agent in Virginia, Washington DC and Maryland with RLAH Real Estate, 4040 N Fairfax Dr # 10C Arlington VA 22203. 703-390-9460.


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